Yu Darvish, whom the Dodgers had hoped to retain despite his poor starts in the World Series, agreed to terms with the Chicago Cubs on Saturday.
The contract is for six years and a guaranteed $126 million, making the deal the longest and richest for any free agent this winter.
Darvish, 31, had worked out with Dodgers ace Clayton Kershaw in Texas all winter, and the team had remained in contact with him.
But the Dodgers would not match the Cubs' offer, and in any case, would have had to clear payroll space for Darvish by trading Logan Forsythe, Yasmani Grandal, Matt Kemp or Hyun-jin Ryu.
The Dodgers are intent on not paying a luxury tax this season, assessed on teams with a payroll above $197 million. The Dodgers could not have avoided the luxury tax by paying Darvish a low salary this season and higher salaries after because the tax is assessed based on the average annual value of the contract.
If the Dodgers hit their payroll target, they will save about $100 million this season in payroll and taxes. They could use some of that savings to retain Kershaw, who can opt out of his contract after the season.
The Dodgers will open spring training on Tuesday with a projected rotation of Kershaw, Rich Hill, Alex Wood, Kenta Maeda and Ryu, backed up by Ross Stripling, Brock Stewart and Walker Buehler.
They also hope Julio Urias can return from shoulder surgery by the All-Star break. And they could trade for a starting pitcher as needed during the season, as they did with Darvish last July, when their commitment to him was two months rather than six years.
Darvish went 4-3 with a 3.44 earned-run average in nine starts for the Dodgers. He beat the Arizona Diamondbacks in his one start in the National League division series and the Cubs in his one start in the league championship series, allowing one run in each.
But he bombed in the World Series, recording just five outs in each of his two starts. The Dodgers lost the series to the Houston Astros in seven games; his World Series ERA was 21.60.
The Dodgers and Cubs have met in the National League championship series in each of the previous two seasons. Analytical projections have the Dodgers winning the most games in the NL this year, followed by the Cubs.
The Cubs' projected rotation: Jon Lester, Kyle Hendricks, Darvish, Jose Quintana and Tyler Chatwood. They have let Jake Arrieta and John Lackey go via free agency.
According to the Athletic, which first reported Darvish's agreement with the Cubs, incentive bonuses could make the contract worth as much as $150 million. Darvish, who has had Tommy John surgery, will be 37 when the contract expires.
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